Why Your Rent Is So High and Your Pay Is So Low
August 6, 2015 9:11 PM   Subscribe

 
The rent is too damn high.
posted by DirtyOldTown at 9:24 PM on August 6, 2015 [15 favorites]


> Forty years ago, in my now fashionable London neighborhood, houses sold for well under £30,000. Today, many are worth £2 million. Few young people can afford the down payment, and, anyway, for houses to continue to appreciate at this pace, these houses would have to be worth £128 million by 2055.

I wouldn't bet against this happening in Toronto.
posted by The Card Cheat at 9:41 PM on August 6, 2015 [7 favorites]


The pay is too damn low.
posted by univac at 9:47 PM on August 6, 2015 [38 favorites]


I'll read this when I'm still not fuming over the GOP debates.

But I know my 25 year old daughter and her husband, both college grads, (and their child) are screwed. They're in the SF Bay Area, not even SF proper, where the rents are insane, even in the most distant suburbs. Real jobs are hard to find. I don't know what they'll do or how they'll get by.

I know we're keeping our house that's bigger than we need just in case it gets worse.

How can this be good for the country...
posted by cccorlew at 10:00 PM on August 6, 2015 [2 favorites]


Golly, it's almost as if those of us who still remember the visceral revulsion we felt every time we heard Reagan or Thatcher speak had judged them correctly.
posted by flabdablet at 10:22 PM on August 6, 2015 [150 favorites]


If house prices are appreciating so much you'd think that the smart money would be in construction. But it isn't; there's decent money there, but it's a business like any other. You couldn't (e.g.) construct a town with dwelling places and commercial buildings and expect to command crazy prices for it. Rents aren't too damn high from the perspective of investors: property prices are high, which bleeds over into rents. And the properties that are appreciating are the ones that have a track record of appreciation, not ones that fill an imaginary need.

It's like art: the purpose of investment art is to store value and appreciate, not fill a blank space on someone's wall. People pay crazy money for works by recognised artists, and work by unknowns is practically free. You can't make money by producing "art"; you can only make it by persuading people that your art is an appreciating asset.

So why are asset prices high? Because it's a bubble. Investors are looking for capital appreciation, not rental income, just as Dutch tulip-fanciers were looking for capital appreciation, not a market in cut flowers. This is bad news for everybody, because it means that we don't expect to become richer, as a society: in fact we can expect further rent rises to pay off the cost of these inflated assets, but no higher wages to pay the rents.
posted by Joe in Australia at 10:41 PM on August 6, 2015 [44 favorites]


It's like a disease.
posted by bleep at 10:50 PM on August 6, 2015 [4 favorites]


The 1970s have a bad reputation amongst pundits and policy makers, but for most working people they were pretty good.

Let's all let that simmer for a minute. Like a nice stew. It takes a while for the meat to get tender and the flavors to mingle. Mmm.
posted by 3urypteris at 10:51 PM on August 6, 2015 [32 favorites]


While it is true that the situation in the 70s was unsustainable, the current situation is also unsustainable. Problem is that the people who are being fucked are generally powerless unless they go so far as a literal revolution. Police-as-occupying-force keeps that threat essentially zero in advanced countries, and so the owners of capital see no problem with the present situation.

It was only the literal threat of a communist revolution that ended the last Gilded Age. Without the return of that or a similar threat, I fear nothing will end Gilding 2: Platinum Edition.
posted by wierdo at 10:53 PM on August 6, 2015 [19 favorites]


Easy: my rent gets raised usually about $40 a year, my paycheck gets...ZERO RAISES FOREVER.
posted by jenfullmoon at 10:59 PM on August 6, 2015 [17 favorites]


I'll just leave this here: In World's Best-Run Economy, House Prices Keep Falling -- Because That's What House Prices Are Supposed To Do

When Americans travel abroad, the culture shocks tend to be unpleasant. Robert Locke’s experience was different. In buying a charming if rundown house in the picturesque German town of Goerlitz, he was surprised – very pleasantly – to find city officials second-guessing the deal. The price he had agreed was too high, they said, and in short order they forced the seller to reduce it by nearly one-third. The officials had the seller’s number because he had previously promised to renovate the property and had failed to follow through.

[...]

German house prices in 2012 represented a 10 percent decrease in real terms compared to thirty years ago. That is a particularly astounding performance compared to the UK, where real prices rose by more than 230 percent in the same period.

And maybe this is a bit off the wall, but I've never understood the notion that government should keep its collective noses out of the economy and let the almighty market dictate outcomes. The reasoning behind that silliness parallels the equally ridiculous arguments coming (usually) from the same people, but against cloning, fertility treatments, stem cells, etc. -- we can't play God! Maybe we're better off leaving those things to Nature. No, that's not how it works, you idiots. The market is not a goddamn natural phenomenon beyond our control. We are in control and we can dictate the outcomes that we, as a society, want to happen. Once you realize that, the solutions to these problems are obvious.
posted by un petit cadeau at 11:00 PM on August 6, 2015 [78 favorites]


The 1970s have a bad reputation amongst pundits and policy makers

The Very Serious People. Mark II VSPs emerged in the run up to the invasion of Iraq.
posted by the man of twists and turns at 11:00 PM on August 6, 2015 [5 favorites]


Had the government not backstopped the banks, you and I could quite easily have gone to the ATM, slipped in our card, and been told the money we thought was safe in our accounts was gone.

IndyMac, WaMu . . . it almost happened here but after Lehman the system soon had had enough of that.

https://research.stlouisfed.org/fred2/graph/?g=1AnE

compares mortgage debt to total wages, showing the general shape and size of the bubble.

What made the housing boom/bubble doubly pernicious was that the larger economy became dependent on the trillion-dollar flow that housing was generating -- this borrowing (& spending) was a stealth stimulus lifting many local economies 2003-2008.

Another FRED view, comparing YOY job gain/loss to mortgage debt take-on:

https://research.stlouisfed.org/fred2/graph/?g=1AnJ

showing how the loss of new borrowing soon resulted in layoffs.

In the big-picture view:

https://research.stlouisfed.org/fred2/graph/?g=1r7F

shows how housing expense is locked to wages.

This last graph is the treadmill we're on, one I first posted about over 10 years ago in my first attempt at Georgist evangelism on the front page.

The place my parents rented in El Cerrito for $300/mo in the mid-70s now rents for $2300, an increase about twice the rate of inflation.

Housing is not like any other form of wealth. The land component can't be manufactured, nor can housing itself be imported from cheap-labor countries or moved around once it's here.

And it's a very primary human need, right at the base of the Maslow Pyramid. Living without legal tenancy in land for just one day is a total life disaster.

This combination results in housing taking every penny we can be made to cough up to outbid the next person who wants tenancy, either to the landlord for the leasehold or the seller for fee simple ownership -- at least where there is more demand than supply.

The author is correct that the only solution is to overbuild to induce oversupply. This is a political non-starter, as he says.

Demographics is starting to blindside us here, too. Gen Y is bigger than the boomers, and they are age 15-33 right now, just beginning to exert demand, while the boomers (age 51-69) are still in their houses.

This is a big pinch as the Japanese would say.
posted by Heywood Mogroot III at 11:08 PM on August 6, 2015 [27 favorites]


Owning a building back then didn’t make you rich. Instead it was a drain on capital.

These two sentences threw me for a bit of a loop. I'd love to get back to an era where rents were cheap. But the article seems to be suggesting that those cheap rents set up a situation where nobody in their right mind would be a landlord. (Which matches my second-hand impression of New York in the 1970s, though I wasn't alive at the time: not just landlords setting their buildings on fire, but also landlords walking away and abandoning their buildings — that's what made squatting an option, right? — or continuing to collect rent but refusing to keep the building in good condition.)

And if nobody in their right mind would be a landlord, then that's a problem. Because landlords do actually provide a necessary service. Some people are inevitably going to need to be tenants. Someone who's living paycheck-to-paycheck can't buy an apartment, and couldn't buy one even if prices were ten times lower than they are. If it makes more sense for a landlord to abandon a building than to keep it in decent condition and rent it out to working poor people, then that's actually a pretty fucked-up situation, no?

Maybe I missed it, but I feel like the article never really addresses that dilemma. The question I wanted an answer to was, "What's the third option? How can we have a city like New York that isn't bleeding its tenants dry or getting burnt down or abandoned to squatters?"
posted by nebulawindphone at 11:19 PM on August 6, 2015 [11 favorites]


The author is correct that the only solution is to overbuild to induce oversupply. This is a political non-starter, as he says.

Except then you have places like Manhattan, where there's been a ton of high-rise construction happening over the last ten years, but most of those units sit empty because (a) the people selling won't budge on the price and there just aren't enough people who can afford it (b) the people who can afford it are billionaire foreign speculators who buy condos to park their money and never actually live there. Flooding the market with housing doesn't automagically make prices come down. Also, it's impossible to provide that oversupply when NIMBYs in low-slung bohemian neighborhoods are screaming holy hell about preserving their "character" because they read a Jane Jacobs book that one time in school.
posted by mirepoix at 11:20 PM on August 6, 2015 [17 favorites]


In my city, we have the opposite problem: the rents are too damn low. Maybe not from many residents' perspective - there is a general lack of good wage jobs - but too low to support the maintenance of the housing stock.

I just viewed a house this week; cute little 2-story, 1200 square feet, uninhabited. Owner paid $54k for it 10 years ago. Wants to tear it down because it "needs too much work". So she is willing to spend $16k to demolish it plus eat the $54k she paid to gain an empty lot which has no intrinsic value (plenty of them around, none selling).

I'm not sure exactly why it would cost "too much" to rehab this house - it wasn't structurally bad or anything, it just needs renovation. Maybe the building codes make the cost too high, or maybe the people doing the work can earn high salaries renovating more expensive houses.

Yet no one seems to want to live in this house, to fix it up, despite it being on a street with plenty of other houses. I think it is because we use high housing prices as a form of protection. Paying $50k for a house is somehow a bad thing because that means you're going to live near people who can only afford $50k for a house. If you pay $400k for your house, then you are going to live near people who can afford $400k and avoid the people who can only pay $50k.
posted by RalphSlate at 11:21 PM on August 6, 2015 [13 favorites]


Flooding the market with housing doesn't automagically make prices come down.

Flooding the market with luxury housing does, however, seem to push prices higher. At least in Seattle.
posted by a lungful of dragon at 11:26 PM on August 6, 2015 [9 favorites]


(b) the people who can afford it are billionaire foreign speculators who buy condos to park their money and never actually live there.

This is an often repeated line, and I still don't know, if true, why someone doesn't approach owners and come up with some sort of lease agreement.
posted by pwnguin at 11:29 PM on August 6, 2015 [1 favorite]


Flooding the market with luxury housing does, however, seem to push prices higher. At least in Seattle.

Yeah, if you're basing the market rate on the margins of what some maniacs are charging, affordability just nopes right out and the only way to get it is through set-asides that no developer wants to provide.
posted by mirepoix at 11:30 PM on August 6, 2015


This is an often repeated line, and I still don't know, if true, why someone doesn't approach owners and come up with some sort of lease agreement.

"Hi. Hey, you, mystery owner in Switzerland that I tracked down through a private investigator. Can I pay you a third of my monthly independent-contractor wage to live in your penthouse? No? Didn't think so. Welp, I tried."
posted by mirepoix at 11:34 PM on August 6, 2015 [19 favorites]


Well, I mean, the theory relies on billionaires (of which there are perhaps 2,000 of) being so bad with money that they buy real property that could be rented out and refuse to. Property management companies exist, though maybe just because REITs are a thing.
posted by pwnguin at 11:47 PM on August 6, 2015 [2 favorites]


How much of this trend is connected to population growth?
posted by Beholder at 11:47 PM on August 6, 2015 [1 favorite]


Rents are high because people want to live in the cool places where the cool jobs are. If you want low rent, you're going to have to give up your dream of working as a cool "creative" in SF, or London, or NYC, because it's not going to get less cool to live there anytime soon.

The article talks about rents exploding in NYC compared to the 1970s, as if NYC in 1970 was identical to 2015 in quality, both in living standards and job opportunities. NYC in the 70s was a goddamn nightmare compared to today. Population in the city fell by nearly a million people, 10%, between 1970 and 1980. It was a shitty place to live. It's less shitty now, and suddenly, it's cooler than it's ever been. San Francisco, same thing -- negative population trends between 1960 and 1980, because it was a fucking terrible place to raise a family. Then, boom, technology. Of course rents increased!
posted by Cool Papa Bell at 12:22 AM on August 7, 2015 [28 favorites]


Property management companies exist, though maybe just because REITs are a thing.

Presumably pension funds invest in these things. Which leads to the deliciously ironic image of people paying into a fund in order to invest in a more secure future, only to find that their future security has out-competed them them for the resources they need right now.

Did I say delicious? I meant horrifying and awful.
posted by xchmp at 12:26 AM on August 7, 2015 [4 favorites]


And maybe this is a bit off the wall, but I've never understood the notion that government should keep its collective noses out of the economy and let the almighty market dictate outcomes.

Yes, god, yes, exactly, that is the problem, a lot of the time when I read articles in English on this issue, my blood boils because everyone, or, almost everyone, authors and commenters alike, seems to forget the issue here of crazy rents and unaffordable cities is about the average population, the masses, the working class (ah! scary word! let’s not use it and pretend it doesn’t exist!) and that we DO have such a thing as government, and it’s in the interest of governments to avoid such insane property speculation getting more and more out of control and affecting actual possibilities of living and working for average citizens in major urban centres, which incidentally are attracting more and more population, according to worldwide trends.

It’s not a theoretical left vs right debate, socialist vs neoliberalists, it’s not about ideology, it’s practical, if governments keep washing their hands of the consequences of property speculation in major urban centres they are going to have more and more massive problems to deal with. But either they are fully in the hands of financial speculators by now, at all levels, or are just too weak to reverse a trend that’s like a timebomb that’s started and no one is brave enough to want to defuse.


the picturesque German town of Goerlitz

Now, I pre-emptively apologise for the long rant-like comment that follows but ah, that link, I do have a lot of problems with that Forbes article posted above by un petit cadeau - and I don’t mean it as criticism for posting it, at all, it is great that you posted it, it’s another good example of some of the issues here.

See, the author at least understands and supports in part the concept of a government regulating a market in the interests of its citizens (and therefore ultimately itself as a government, country, economy, but yeah, ideal).

But the examples... AGH.

First problem: Görlitz! it’s ex-DDR! it’s East Germany bordering on Poland! picturesque all you like but of course no masses of people are moving there, for work or actual reasons why people move to major urban centers that become expensive! it’s a small town of 50k-ish inhabitants, so the fact this American retired historian (ha yeah, retired Brits or Germans buy property in picturesque corner ALL over Europe, that’s irrelevant as example of the possibilities for working people who need to be where there are jobs) was able to buy a fancy little house for cheaper than he was willing to pay, thanks to local government and regulations etc. etc. has, in the first instance, at the basic level, first and above all, less to do with the "world’s best run economy" (sigh... don’t make me curse in German about that) or those local regualtions and a lot more to do with... guess what?

Your old friend, in any market, regulated or not: DEMAND. Lack of, in this case.

And for less than $80K you can buy a fancy little house in a lot of picturesque corners in many other places.... Maybe even by the sea. If you’re retired and want a picturesque corner to spend your happy comfortable retirement years.

In places where people who still need to make a living would never move. Because that’s not where most jobs are.

Happy comfortable retirement which incidentally will remain a dream for a big portion of the current population of the entirety of Europe, but hey, there’s a few pensioners buying fancy little houses on the border with Poland, isn’t that awesome? isn’t that a perfect example of a perfect model of sustanaible property markets for the rest of us?

Problem 2 with the article:

It is hard to quarrel with the results. On figures cited in 2012 by the British housing consultant Colin Wiles, one-bedroom apartments in Berlin were then selling for as little as $55,000, and four-bedroom detached houses in the Rhineland for just $80,000.

Hahahahaha. Ok, where do we start. Berlin: maybe, maybe in 2012 you could have bought a one-bedroom for that price in some part of the city where no one really wants to live back, and maybe you can still do that in 2015, if by "one-bedroom" you mean like 28qm and guess in which direction? yeah, on the direction of Poland... the further you go East from the centre, the cheaper it becomes because guess what? no one wants to live there!

Let’s go back to 2012 and ask a German, Berlin-born and bred person, still in employment, not retired, with a future ahead, maybe wanting to start a family, say, early to mid-30s, if they’d have bought a flat in some of the eastern suburbs with all those lovely former DDR-era tall buildings, or maybe a nice little house even but out in the middle of nowhere by the lakes, if such places had been even available for sale instead of being rented, and then having to commute for 2 hours to get to work in the city. Nevermind Berliners, no foreign buyers would have been that crazy either.

So, no, it’s very rare that you could actually buy a desirable property for $55k in a desirable area of the city and 2012 was just less than three years ago. I scouted small properties for someone else (they decided to rent in the end to have more freedom of choice in terms of quality of property and location, since yes, most properties are rented still) in 2009 and 2010 and it was already a lot more than that, even in still run-down unrenovated buildings in still run-down areas.

Fast forward 3 years later. There has not been the kind of property speculation we’ve been seeing in London or NY or SF for decades, OF COURSE, we’re talking completely different histories, contexts, it’s ridiculous to even make that comparison. The relevant comparison is internal: compared to a few years ago and within the context of the developments (urban, economic, social, population-wise) in the meantime, for local residents, there has been a locally significant level of speculation, with a major impact in both for sale and for rent properties, due a lot to foreign investors.

And yes, as the article correctly states, most Germans in general and Berliners in particular still rent, that’s how the market developed, even when it’s not a necessity, even those who could afford getting a loan prefer to rent as they have more choice, and they often have it better renting (especially if they have been renting the same property for decades in the same family - it’s different for newcomers from other parts of Germany or other countries). But that hasn’t stopped speculation on sales. The ridiculous, largely unjustified hype about this messed up city attracted a lot of investors.

Result: even for those who still want to buy that $55K becomes laughable. There’s few individual properties for sale anyway, and the market that’s actually most booming is the luxury market, or top city centre.

The biggest issue is rents rising, so much that the local government passed a law, enacted just two months ago, June, to try and put a semi-partial cap on new rentals (with lots of loopholes so it’s not a full safeguard anyway but it is something).

In Rhineland, I’ve no idea, but it’s an entire region, does it mean a property in a small town, in the countryside, or in a city? where in the city, where in the countryside? saying "in Rhineland" is just about as useful as saying "somewhere on the map".

The German system moreover is deliberately structured to encourage renting rather than owning. Tenants enjoy strong rights and, provided they pay their rent, are virtually immune from eviction and even from significant rent increases.

Sure, true, provided you’re sufficiently well-sorted financially and don’t expect to live in a major urban area where incidentally most of the jobs would be, provided etc. etc.

I give up, I will just say I do envy the author’s rose-tinted glasses. I have zero patience left though for "oh wow for us not living this country, this country’s market sounds really so much better, I will now pick and choose only the things that work and ignore completely the actual problems the average people in that country are facing".

Journalists writing such selective pieces have no excuse, they don’t even need to read the local media and speak the language, or even, come to the country and talk to the average person in the street. Just google a bit further maybe? Here’s a first random counterpoint to that article, and this is the Deutsche Welle, the official "Germany proudly presenting itself to the world" media in English, not some far-left anticapitalist publication predicting doom and gloom for the working masses, and it’s from 2013, so in the meantime the trend has gone further: Rents increasing in German cities – Rents in Germany’s big cities are rising so fast that fewer and fewer people can afford the urban life. Demands for social housing are increasing.

Sure, compared to New York or London, even major German cities and the capital are a paradise for renters, but how insane and ridiculous is that comparison.

You know what was a far better example of affordable regulated property market granting a home to literally every single citizen in the country? Far better example in that respect, at least, if not in others. Görlitz and the whole of East Germany surrounding it back then, actual DDR era. And the influence of communism also on other democratic countries in Europe, back then. You can’t say that now, not on Forbes for sure, but it’s like since the Wall fell, that’s it, the idea of any government regulation on property is tainted, the world has gone in the completely opposite direction with a vengeance, and even the specific things that did make sense are taboo. Mr Gorbachev, tear down this wall and whatever will be will be, the future’s not ours to see...
posted by bitteschoen at 1:31 AM on August 7, 2015 [51 favorites]


If house prices are appreciating so much you'd think that the smart money would be in construction. But it isn't;

It's not about the bricks and mortar but about the land and getting permission to build.
I know one couple who are objecting to a proposed new build development near to their village, while also complaining that their children can't afford to move out. You can't have it both ways.
posted by Lanark at 1:38 AM on August 7, 2015 [7 favorites]


As previously mentioned upthread, the past two decades have seen a reversal of the trend of flight away from cities into them. Each city has its own problems related to development (I most recently moved away from SF and have become gentry ruining the place in Portland), however the trend is inevitable--people want to live in cities.

The main driver of these increases in rent and housing cost are not foreign investment. Certainly there are rich folks buying properties to leave them fallow, using them as investments or hedges. However it seems like a big red herring. It's clear, most young people want to live in the city, and there are lots of young people. The highest earning of these will wind up living in the cities they want.
posted by ugly at 2:47 AM on August 7, 2015 [6 favorites]


So look, the question the politicians have to answer is this: while you may want the corporation to get fucked over, the corporation isn't going to get fucked over. As a result, do you want to fuck over the haves or the have nots? Have nots don't have front lawns to put campaign signs on, let alone money to contribute to your war chest. I say war chest, because the campaign sign is clearly class warfare.
posted by Nanukthedog at 4:22 AM on August 7, 2015 [2 favorites]


Maybe my perspective is different because I'm working in a public-sector job (and looking for another one), but I don't even see this as a problem of just New York City or that handful of hip, expensive cities. I'll see a job ad posted that seems to match what I'm looking for, and then I go to Craigslist and Apartments.com, and about half the time either there's no rental housing in the area at all, or the rents are such that living there would be really difficult on the posted salary. And I know that public library salaries are low, but when I look at the statistics, it's often significantly higher than the median salary for the area.

The article points out that in the 1950s the median Manhattan apartment rented for $530, indexed to inflation. Is there anywhere in the US where the rent is that low? In none of the 25 surveyed cities is the median 1-bedroom even under $800. (I found one market under $530 by clicking through to the full report: Wichita, KS.) And even in Wichita, KS -- you'd need to be making $58,000 to spend only a tenth of your salary in rent, and there are not many $58K jobs in Wichita.

It's only in New York and in San Francisco and a handful of other cities where the rents are so high even relative to the salaries of the well-educated and technologically-oriented that articles get posted to MetaFilter about it, but rents are expensive relative to wages all over the country.
posted by Jeanne at 4:27 AM on August 7, 2015 [16 favorites]


It's been pointed out that the line, "the unions in the seventies ruined everything!" is most often repeated in Britain and the U.S., where class and capital had the most to lose. Also, to really appreciate how far wages have fallen, try rolling back the availability of cheap Asian-made consumer goods to 1970s levels.
posted by bonobothegreat at 4:40 AM on August 7, 2015 [4 favorites]


That was a pretty well-articulated article, thank you for posting. We have a similar problem in Sydney. I currently spend almost half of my pay on rent. It is unsustainable.

The part of the article that was glossed over was this:
We vote and so politicians listen to our desires. Falling house prices would be a boon for renters and first-time buyers (and probably for society at large), but their political clout is less than that of middle-aged, middle-class property owners.

I'm not sure how it plays out in the US, but here we have NIMBYsm (not in my back yard). Homeowners do not want to see their property be devalued by new apartments (or go forbid, housing developments) going up in their neighbourhood. They occupy positions on local councils where, together with their fellow property-owning council members, they dictate council policy to ensure that the status quo remains unchanged. Meanwhile, 1000-2000 people arrive in this city every week because all the work is in the cities. Demand continues to soar, rental rates continue to rise, and work becomes harder and harder to find.

It's like musical chairs, where all the baby boomers sat down in 70s.

I wonder, sometimes, whether there will be a reckoning for these people as their children send them into retirement homes, or try to arrange at-home care. They're going to need young people to look after them, but in order to pay their exorbitant rent, said young people may need to charge $120/h to make sure grandma takes her meds.
posted by kisch mokusch at 4:48 AM on August 7, 2015 [8 favorites]


I wouldn't bet against this happening in Toronto.

Toronto seems to be the cheaper London. The oligarchs and billionaires in China, Russia, former Soviet-stans and other places like to park their money in London real estate.

The mini-oligarchs and deca-millionaires from those same places can't quite afford top places in London so they go for Toronto instead.
posted by theorique at 5:23 AM on August 7, 2015


Bourgeois interests align with Capital against Working Classes- film at 11.
posted by TheWhiteSkull at 5:29 AM on August 7, 2015 [12 favorites]


I think it is because we use high housing prices as a form of protection. Paying $50k for a house is somehow a bad thing because that means you're going to live near people who can only afford $50k for a house. If you pay $400k for your house, then you are going to live near people who can afford $400k and avoid the people who can only pay $50k.

This is dead on target, I think. It's part class and status signaling, part safety, and part smart investment.

If you can afford $400K for a house and actually want to spend $400K, it often makes sense to buy the $400K house surrounded by $600K houses (better neighborhood, better school district, etc) rather than an obviously nicer house surrounded by $150K houses. There's also the psychological anchoring effect of the surroundings - if you make improvements to a $400K house in a $600K neighborhood, you're much more likely to see that reflected in resale price, whereas if you make improvements to a house that's already vastly more expensive than its neighbors, you may have a hard time recouping that investment.

And of course, depending on the surrounding city or region, there may be a highly tangible difference in actual personal safety between spending $50K and spending $400K for a property.
posted by theorique at 5:40 AM on August 7, 2015 [8 favorites]


Rents are high because people want to live in the cool places where the cool jobs are. If you want low rent, you're going to have to give up your dream of working as a cool "creative" in SF, or London, or NYC, because it's not going to get less cool to live there anytime soon.

It's kind of gross to outright assert that people who want to live where the jobs are are just trying to be "cool". We're hunting now, and rentals in suburbia that offer a reasonable car-free way to get to the nearest metropolitan center are damn near mythical, and not actually any cheaper than more convenient (though much smaller) units closer to the core. I think the article missed an important point by not addressing the loss of "job quality" coupled with the stagnant minimum wage. What you pay for is access to the city, and when the entire suburban economy is built on retail, what choice do you have?
posted by WCWedin at 5:55 AM on August 7, 2015 [21 favorites]


so bad with money that they buy real property that could be rented out and refuse to

It's being done, quite literally, as a safe deposit box. Do you let other people borrow your safe deposit box? Real estate transactions are usually large sums of money, oddly enough are subject to relatively little oversight and the buyers are often people who need to move large sums of money from one jurisdiction into another to hold it as a backup to their normal life.

Look into One Hyde Park. It's the canonical example of this type of thing. There are quite a lot of articles on these sorts of transactions. It's not the 1% being bad at money, it's the 1% using real estate as something other than real estate.
posted by aramaic at 5:56 AM on August 7, 2015 [2 favorites]


The rents are high because people are willing and able to pay them. Period. No one wants to cut the demand for housing in nice places (which is what made rents cheap in the 1970s, and it was ugly), so the only solution is more supply.

Make it cheaper and easier to construct housing, and more housing will be built, and the price of housing will fall to a minimal profit margin on the cost of construction. But you don't see anyone complaining about rents in San Francisco or Manhattan arguing to remove set-aside, rent stabilization, LEED, height, or prevailing wage rules or provide no-strings-attached tax abatements. (I don't know what Ed Lee is doing in SF, but in NY Bill DeBlasio went to the wall earlier this year to increase the total effective cost of housing construction.)

Zoning, by the way, is an entirely bogus obstacle. Major metros abound with already-dense or industrial areas which could support hundreds of thousands of units of housing if able to be cheaply constructed; there's absolutely no need to trounce on the collective desire of property owners to retain the character of low-density areas.
posted by MattD at 5:58 AM on August 7, 2015 [1 favorite]


Is it me, or did this article not get to the root cause of the problem? I mean, yeah, they talk about Reagan and Thatcher and deregulation and interest rates and "labor getting a bad rap" and blah blah fishcakes, but - do they talk about "how did people let Reagan get away with it" or anything like that?

This paragraph is a good example of what I'm getting at:
During the Golden Age, productivity increases almost immediately translated into wage increases. As technology made workers more productive, their wages went up commensurately. Since 1982, technology and productivity have continued their inexorable rise, but wages have not reflected that growth. The benefits of productivity increases have gone instead to the richest segments of society, or more precisely to the owners of assets, to those who own stocks, bonds, or real estate.
It is not new information to me that "the benefits of productivity increases have gone to the richest segments of society". What I want to see discussed is, how did it get to the point that such things took place. That's the "why" I want an answer to, and I don't believe I see it in here.
posted by EmpressCallipygos at 6:03 AM on August 7, 2015 [10 favorites]


Oh, that one is easy: to most people, politics isn't something you think about; it's a spectator sport at which you take sides to give you credibility within your peer group. The media are largely responsible for perpetuating this state of affairs, because spectacle sells.
posted by flabdablet at 6:11 AM on August 7, 2015 [4 favorites]


"Almost nobody has a job for life. More and more of us are freelance, hired on a job-by-job basis. If we get sick or injured or merely less cool than we used to be, our employer can forget he ever knew us and hire someone else."

Apart from the whole crushing debt not having the money to buy a house, this is another reason why a lot of young people are so reluctant to purchase property. Your income today can disappear at any moment, and the idea of taking on a mortgage based on the notion that anyone can count on a steady (if not increasing!) income for the next twenty years is just...absurd. I can't actually imagine it.

Being an employee who can be trusted to show up and do the work is no longer good enough! In so many fields, you have to fit the brand and live the lifestyle and be very careful about what kind of information you share with your coworkers, or your friends and family, or anyone else who asks about what you do. Don't get pregnant, don't get sick, don't have any family emergencies, don't make waves. Don't work a second job, even if you can't afford to live on what we pay you, because you shouldn't be splitting your focus.

Don't be human. It hurts the bottom line.
posted by a fiendish thingy at 6:42 AM on August 7, 2015 [31 favorites]


Zoning, by the way, is an entirely bogus obstacle. Major metros abound with already-dense or industrial areas which could support hundreds of thousands of units of housing if able to be cheaply constructed

But how many of those industrial areas have sufficient access to public transit? And who's going to pay for any necessary upgrades to support thousands of units of housing? And how many of those major metros even have any decent public transit to begin with?
posted by RonButNotStupid at 6:47 AM on August 7, 2015 [5 favorites]


I want an answer to, and I don't believe I see it in here.

Real wages may not have gone up, but wages of course have. Problem is the more money we make, the more we bid up the cost of housing!

https://research.stlouisfed.org/fred2/graph/?g=1AtR

shows how housing costs have expanded from 20% to 28% of wages since 1970.

Another problem with housing it is that given its dominant position in all our budgets -- McDonald's ill-advised financial advice pamphlet had rent at the largest expense at $600/mo -- housing is a rent-tap that is stripping wealth from the lower quintiles to the parasitical wealthy (see a Monopoly game for how this works).

If empty housing is an obscenity, we could tax it more . . .
posted by Heywood Mogroot III at 6:58 AM on August 7, 2015 [1 favorite]


...unions pleaded for a rate cut, but Paul Volcker and Nigel Lawson were implacable in their conviction that pain was necessary in order to crush inflationary expectations.
When I was at the Fed, I saw at least one of these 2x4's.
posted by MtDewd at 6:58 AM on August 7, 2015 [1 favorite]


The 1970s have a bad reputation amongst pundits and policy makers, but for most working people they were pretty good.

He's leaving out the part where NYC actually lost 10%(pdf) of its population in that decade because of becoming a crap hole of a city. This while the population of the country as a whole was soaring.

As to now, well, true enough much of what he says, but wouldn't simple supply and demand (to many people chasing too few apartments and jobs in a congested market) answer for a lot? Occam's razor and all that.

(And if you want to bash politicians and policy makers, why limit yourself to Reagan/Thatcher? No prizes for their Democrat/Labour counterparts in the sixties. Moreover, housing's steepest price climbs came after 2000, largely the result of all that loose money that Republican/Democratic Fed Favorite Greenspan let loose. A pox on both parties, say I.)
posted by IndigoJones at 7:08 AM on August 7, 2015 [4 favorites]


I'll see a job ad posted that seems to match what I'm looking for, and then I go to Craigslist and Apartments.com, and about half the time either there's no rental housing in the area at all, or the rents are such that living there would be really difficult on the posted salary.

Not to disagree with the larger point, but if you're looking that broadly there are a fair number of areas where buying is substantially cheaper than renting, especially if the rental market is distorted by students.
posted by ROU_Xenophobe at 7:33 AM on August 7, 2015


On a much smaller level, I also blame HGTV and similar for tricking everyone into believing that unless the kitchen has a granite countertop, it's garbage and needs to be "updated" and any bathroom with original grandma-colored tile? NEEDS UPDATING. So I can no longer find a cute 1960s ranch in a reasonable neighborhood because property owners have been told--by fussy renters or by HGTV itself--that a place is uninhabitable with old tiles and formica countertops. So they spend an insane amount of money to "update" and raise the rents accordingly. And! The "update" rarely includes meaningful repairs to plumbing or other structure. It is purely cosmetic and now can be rented at luxury rates.

I am very, very resentful of the granite countertop phenomenon and its role in raising rents.
posted by witchen at 7:43 AM on August 7, 2015 [31 favorites]


there are a fair number of areas where buying is substantially cheaper than renting

Cheaper in terms of a monthly payment, sure. But a down payment for a purchase is laughably beyond the means of most renters, whereas a security deposit is at least possible.

Plus, when you own the place, all the maintenance is your responsibility. Down payment PLUS replacing the furnace if it blows out/paying property taxes/paying homeowner's insurance/paying sewer and trash fees/paying someone to come retrieve a dead raccoon from your crawlspace? The costs just go on and on.
posted by a fiendish thingy at 7:51 AM on August 7, 2015 [7 favorites]


Your income today can disappear at any moment, and the idea of taking on a mortgage based on the notion that anyone can count on a steady (if not increasing!) income for the next twenty years is just...absurd. I can't actually imagine it.

This is pretty much a one sentence précis of a drawn-out, depressing conversation my partner and I have been having off and on for months. It has petered out into our deciding to stay in a too-small place in our gentrifying city rather than risk our necks.
posted by ryanshepard at 7:58 AM on August 7, 2015 [6 favorites]


The dismissive comments about not living in a 'cool' city if you can't afford it, and how it's hip young people driving up prices not rich old people just infuriate me. I'm from Vancouver, and can't afford to move back. I miss home every day.

Toronto is barely better, but at least I have a job. As someone who refuses on principle to drive a car or work in the oil or mining industry, I have little choice but to live in the 'hip' places in Canada. There is literally nowhere else for me to go.

Tell me again how the empty condos thing is a myth. Before I left Vancouver, I lived in two buildings that were over 5 years old that were full of empty units that were 90% investment, 5% vacation home and 5% short-term furnished rental. I also lived in a 70s purpose-built rental across the street from Coal Harbour, which is a fucking ghost town because that is all those buildings are. Most of the people living in those expensive condos are renting for 1/3 of what a mortgage on the same place would be because they are all owned by investors who paid in cash.

And it's not all Chinese billionaires. The last place I rented in Vancouver was a condo owned by a not-quite-obscenely-wealthy white American couple, who had some realtor act as a property manager for them.
posted by [expletive deleted] at 7:58 AM on August 7, 2015 [11 favorites]


Demographics is starting to blindside us here, too. Gen Y is bigger than the boomers, and they are age 15-33 right now, just beginning to exert demand, while the boomers (age 51-69) are still in their houses.

There may be more Gen Y out there, but percentage-wise, way fewer of us are buying houses. (Looks like it's roughly 35% of the 35 and younger crowd who own homes as opposed to 75% of people 55-64 based on this.)

Moreover, when folks 35 and under ARE buying homes, I think we're looking for different things from the Boomers -- closer to town and transit, smaller, and more affordable. I think a lot of areas will see stagnation, especially exurbs and properties at the mid- to high-end of the market, as Boomers attempt to sell off their house/retirement funds and the demand just isn't there to support them.

On the other hand, in areas along the coasts, new flood maps and flood insurance requirements are starting to eat away at the affordability of established neighborhoods, which will result in (and in some cases already is resulting in) a loss of housing stock. So this balance may play out differently on the coasts over the next couple decades.

Zoning, by the way, is an entirely bogus obstacle. Major metros abound with already-dense or industrial areas which could support hundreds of thousands of units of housing if able to be cheaply constructed

Yeah, if only. Part of my dayjob is in the field of turning neglected industrial sites into housing and let's just say that the costs involved in doing so will never be cheap.

Moreover, most states with high demand for new housing (NY, CA, MA) are also states with protective environmental restrictions that mean that you can't just dump new housing onto lead-impacted soils or on top of a chlorinated solvent plume that will intrude into your basement. This is a good thing, of course, but it does tend to mean that it's primarily the sites in plum locations to support high-end, high-return developments that will see this kind of residential redevelopment.
posted by pie ninja at 8:07 AM on August 7, 2015 [2 favorites]


What I want to see discussed is, how did it get to the point that such things took place. That's the "why" I want an answer to, and I don't believe I see it in here.

This is only a part of the answer, but look up the phrase "shareholder value." There was an excellent article - I believe in The New Yorker - that I read sometime in the past year which discussed the common conception of the role of the corporation changed a lot in the 70s/80s to emphasize short-term gain at the expense of both long-term sustainability and any conception of the role of the private, for-profit, corporation in the larger society. The rise of corporate raiders, private equity, and activist shareholders played a role, too.

Most companies have tons of cash right now, but they would rather use it to buy back shares, say, than give their employees meaningful raises. Why? "Shareholder value."

(I tried to find the particular article I read, but couldn't...either way, it's easy to find information on this topic via Google. I also realize that tax policy, weak labor unions, Reagan, Thatcher, et. al., play a role here, too, but this particular subject gets overlooked, I think.)
posted by breakin' the law at 8:09 AM on August 7, 2015 [2 favorites]


Witchen -- you shouldn't resent landlords, because it's solely renters, and not landlords, who determine the rents. If tenants don't value granite countertops enough to pay for them, than they rent goes right back where it was when it counters were formica topped.

Ron -- making real estate developers responsible for mass transit improvements is exactly the kind of thing that chokes off the supply of housing, or, more often, directs it to places where they aren't required to make those kind of vast expenditures which they won't necessarily be able to get back in rents.
posted by MattD at 8:24 AM on August 7, 2015 [1 favorite]


Might it be this article, breakin' the law?
posted by wallawallasweet at 8:25 AM on August 7, 2015 [1 favorite]


Well, I mean, the theory relies on billionaires (of which there are perhaps 2,000 of) being so bad with money that they buy real property that could be rented out and refuse to. Property management companies exist, though maybe just because REITs are a thing.

The ghost-property thing is a real phenomenon, and it does exert influence on the real estate markets in some, particularly high-demand, cities (most notably London, but also NY, Vancouver, SF). So...why aren't the billionaires renting out the units? Two things:

First, most of these billionaires buy these places mostly to park money, but also so they can have a comfortable, fancy place to stay when they are in town (for all of, like, two weeks a year). The rest of the time, they can tell people about it. It's a luxury good. Whatever money they could make from renting out a property - even a high-end condo overlooking Central Park - isn't going to be worth the hassle of being a landlord and the loss of prestige stemming from turning their luxury investment into a, well, regular investment. You're not going to buy a Rolls-Royce and then hire some dude to drive it around on Uber to make some extra cash, even if you hardly drive it yourself.

Second, and I don't totally know about this, but I would be very surprised if most of these high-end luxury developments didn't have rules against renting out units, so as to keep out the hoi-polloi.

That said...

Then, boom, technology. Of course rents increased!

Yes, demand increased. But supply didn't increase to match demand. That's the main reason why rents keep skyrocketing. Yeah, ghost properties play a role - and I think cities like NYC and London should enact rules making it very difficult, if not impossible, to just park money in property without using it for something - but the key issue is supply. Yeah, lots of condos have gone up in New York. But it's still nowhere near enough to match demand.

The simple fact is, is we actually, really, want rents to be affordable again, cities like New York are going to need to build new housing on a scale beyond what anyone is currently contemplating. We'll need to transform the city, and we have decided (despite all our bitching about the rent) that we do not want to do that.
posted by breakin' the law at 8:25 AM on August 7, 2015 [5 favorites]


As someone who refuses on principle to drive a car or work in the oil or mining industry, I have little choice but to live in the 'hip' places in Canada.

Such principles are a luxury in this market.
posted by fiercecupcake at 8:31 AM on August 7, 2015 [2 favorites]


Demand from renters and supply of housing is not all there is to the story: the supply of money that people want to invest in real estate instead of in, say, tech stocks or T-bills or bonds has also increased quite a lot, or so I have heard.
posted by thelonius at 8:32 AM on August 7, 2015


We actually have a terrific case study in New York for a HUGE expansion of one particular kind of housing: hotel rooms. Ten years ago there were basically two hotel options in Manhattan: fleabag tourist traps, and exorbitantly expensive five star hotels. Since then, on the order of 100 hotels franchising the mid-price mid-service hotel banners (Marriott Courtyards, Hampton Inns, etc.) have opened up between Canal Street and 59th Street, fundamentally transforming an important element of the tourist business.

How? Simple. The government and the immensely powerful construction and hotel workers unions allowed it to happen, and at terms that made it possible to earn a return on capital.

Developers would overnight file to build hundreds of 50-250-unit apartment buildings in the same geographic span of Manhattan if the government took away all the constraints (building codes aside) and basically said that aggregate property tax would only go up on the parcel by the estimated marginal public school attendance per unit (i.e., basic cost recovery).
posted by MattD at 8:35 AM on August 7, 2015 [2 favorites]


you shouldn't resent landlords, because it's solely renters, and not landlords, who determine the rents.

This doesn't lessen their parasitical nature in our economy, especially buyers of "buy-to-let" SFH.

It is true that the LL does not control rents, the next bidder for the leasehold does.

Granite countertops has little to do with this, rising wages push up rents regardless of the amenities. It is the LL getting something for nothing, as rents are largely driven by what exists outside the lot lines.

I know this because what rented for $700 in 1989 in Sunnyvale now rents for $2400, with minimal renovations.

Rental housing is *the* primary asymmetry, imbalance in our economy, stripping hundreds of billions out of the paycheck economy every year. My rent checks while living in Sunnyvale 2006-2011 went to Boston, and thereafter who the hell knows.

At least healthcare comes with more jobs, keeping more money in the economy.

https://research.stlouisfed.org/fred2/graph/?g=1Axy
posted by Heywood Mogroot III at 8:45 AM on August 7, 2015


Writing this off as people wanting to work "cool" "creative" jobs is an idiotic sneer, motivated by God knows what ugly thing. It's simply a problem of needing to be where any job is. It's not like there are actually thousands of uncool but otherwise perfectly adequate jobs outside the cities. This is simply not a thing that is true.
posted by ominous_paws at 9:04 AM on August 7, 2015 [23 favorites]


Cheaper in terms of a monthly payment, sure. But a down payment for a purchase is laughably beyond the means of most renters, whereas a security deposit is at least possible.

Depends on where you're thinking of. Around here, the average rent for a 1-bedroom apartment is *google* $830, but on an 85/15 mortgage you could easily buy a 2 or 3 bedroom house, in boring-normal condition, in a decent area for ~$550/month (incl escrow) with $3750 down.
posted by ROU_Xenophobe at 9:12 AM on August 7, 2015 [1 favorite]


Wozniak's famous HP-35 calculator cost $400 ca 1975 and had ~30,000 transistors.

House rents in the bay area in 1975 were right around $400/mo too.

I bought an iPad last year for $400 and it had 3 billion transistors.

If real estate had "depreciated" like semiconductor products (taking transistor count as a measure of utility), we each could have an entire tropical island like Maui for our own exclusive use for maybe $100/mo.

Due to the land component, real estate is on a different plane vs. normal free-market capitalism, and while as a Georgist I'd like to think proper free-market incentives would be necessary and sufficient to mitigate the economic damage this sector is effecting, I'm not sure about the 'sufficient' part.
posted by Heywood Mogroot III at 9:16 AM on August 7, 2015 [1 favorite]


Unemployment and bankruptcies soared; businessmen, politicians, and unions pleaded for a rate cut, but Paul Volcker and Nigel Lawson were implacable in their conviction that pain was necessary in order to crush inflationary expectations. Economists have long recognized the relationship between unemployment and inflation. When workers fear for their jobs, they don’t ask for raises.

Reagan, Thatcher, Volcker, and Lawson succeeded beyond their wildest dreams. Inflation, which hit 13 percent in 1980, has only exceeded 5 percent once since 1983 and generally has been under 3 percent. Labor’s demand for cost of living increases sparked the 1970s inflationary spiral, and once wages stopped going up, so did inflation.
The inverse relationship between inflation and unemployment isn't absolute—stagflation, high inflation combined with high unemployment, was a problem in the 70s. And given that the US currently has 0.1% inflation and 5.3% unemployment, it shows that both can be low as well as high. So the third statistic we'd like to optimize is actual gains in wealth: wages should go up, not because of inflation, but because more efficient technology and healthier longer-living people and higher productivity all end up creating more wealth, and it ought to be distributed fairly (a tautology if your idea of "ought" includes fairness). Any suggestions on how to achieve this that don't involve completely restructuring the economy and government? *cough* Basic Income? *cough*
posted by Rangi at 9:20 AM on August 7, 2015 [1 favorite]


Am I remembering right or was there a thing where non-local hedge funds and investment companies were buying up foreclosed properties on the cheap, converting them to rental properties, and increasing the rent as well (because they're only in it for the money rather than being part of the community)?
posted by kokaku at 9:22 AM on August 7, 2015


...and that'll teach me to read the whole article before commenting:
Technological advances ensure that each year we can make more stuff with less labor and capital than the year before. This has not changed. What has changed is how we allocate the benefits of progress. Back in the day, workers got the money; today, owners of assets do. Stagnant wages and higher stock prices are two sides of the same coin.

...

If they wanted to drive down rents, government could fund the construction of public housing, as they did during the Golden Age. More quality housing would increase its stock, and with supply rising to meet demand, prices would fall. This would be great for young renters, bad for middle-aged property owners, bad for banks.
Although reading that makes me wonder why private construction companies aren't doing the same thing, if it's such a good opportunity to make money from young renters. Restrictive regulations on new buildings? Banks unwilling to lend the necessary capital? Not enough undeveloped land?
posted by Rangi at 9:23 AM on August 7, 2015 [1 favorite]


It's not like there are actually thousands of uncool but otherwise perfectly adequate jobs outside the cities.

But, in the States anyway, there are lots of cities that have decent jobs but relatively low housing costs (though rental markets might be out of whack). They're just in less desirable places to live like Jacksonville or Greensboro.
posted by ROU_Xenophobe at 9:24 AM on August 7, 2015 [2 favorites]


Just on a personal level, if I'm considering moving across the country to a city I've never even visited, that really depends on a decent rental market existing; I definitely can't buy a house in those circumstances, even if I can afford it. Even if everything else went perfectly, it would take too long for a job that expected me to start within two or three weeks. (I've been doing a LOT of Skype interviews, since public libraries can't pay travel expenses.)

ROU_Xenophobe, I definitely take your point that rental affordability doesn't necessarily reflect overall housing affordability. But not having an affordable market is really tough for all the people who need the flexibility of renting, or can't save enough to have the boiler or the roof replaced.
posted by Jeanne at 9:29 AM on August 7, 2015 [1 favorite]


Am I remembering right or was there a thing where non-local hedge funds and investment companies were buying up foreclosed properties on the cheap, converting them to rental properties, and increasing the rent as well (because they're only in it for the money rather than being part of the community)?

Yep. There was a rash of them in my town, where the market wasn't all that heated - the 'WE BUY HOUSES! WE BUY - YOU STAY!' crowd. They were buying foreclosed, foreclosing or 'distressed' mortgages, getting the owners (now renters) out of arrears, then jacking up the rent after a few months. We buy, you stay (for a few months).
posted by eclectist at 9:29 AM on August 7, 2015


"Rents are high because people want to live in the cool places where the cool jobs are. If you want low rent, you're going to have to give up your dream of working as a cool "creative" in SF, or London, or NYC, because it's not going to get less cool to live there anytime soon."

Honey, I live in godforsaken Fayetteville, NC, and rents are high here. They're not nose-bleed high, but they are "I can't afford to live alone" high. I've worked for the same place for ten years, and my wage is still not as good as what I was making in DC. I don't have to tell you that my wage in DC wouldn't have gotten me a place on a park bench. The problem isn't cool cities, the problem is class warfare.
posted by corvikate at 9:38 AM on August 7, 2015 [26 favorites]


As someone who refuses on principle to drive a car

Such principles are a luxury in this market.


Yeah, my panic attacks about driving are a total luxury. Watch me swimming around in it with a Draper-at-Esalen look of zen smugness. Also, please tell the thousands upon thousands of elderly, blind, and/or disabled people in America that they have a ridiculously hard time getting anywhere because of "luxury."
posted by mirepoix at 10:01 AM on August 7, 2015 [3 favorites]


Rents are high because people want to live in the cool places where the cool jobs are. If you want low rent, you're going to have to give up your dream of working as a cool "creative" in SF, or London, or NYC, because it's not going to get less cool to live there anytime soon.

So, the 50-year-old janitor who wanted to keep the Bronx apartment where his mama raised him but can't afford to do so now because the rents are too high should just move to Cleveland or something, because being a janitor and wanting to keep your family home are "cool" things he should just give up?
posted by EmpressCallipygos at 10:05 AM on August 7, 2015 [14 favorites]


MattD making real estate developers responsible for mass transit improvements is exactly the kind of thing that chokes off the supply of housing, or, more often, directs it to places where they aren't required to make those kind of vast expenditures which they won't necessarily be able to get back in rents.

So who's going to build it then? Many of these dense urban industrial sectors you speak of would need major upgrades to all sorts of infrastructure in order to convert them into densely populated residential neighborhoods. It's not just mass transit, it's roads, parks, police, schools, and fire protection. If developers aren't putting up the money, then taxpayers have to--and speaking as a taxpayer I'm not at all interested in subsidizing a developer's ability to make back their investments in rent.
posted by RonButNotStupid at 10:06 AM on August 7, 2015 [1 favorite]


The problem with gentrification is that, we've now discovered, we aren't the gentry.
posted by chortly at 10:24 AM on August 7, 2015 [14 favorites]


Rents are high because people want to live in the cool places where the cool jobs are. If you want low rent, you're going to have to give up your dream of working as a cool "creative" in SF, or London, or NYC, because it's not going to get less cool to live there anytime soon.

My first reaction to this was: these kind of statements are always made by affluent people who have never had to rely on local, non-transportable social capital just to survive.

My second was: "Cool" American cities are probably nearing the cusp of finding out the hard way that you can't run an urban area without a working class. No urban administrator working today is old enough to remember what an economically integrated, functional (however messily and inequitably) American city looked like, or how one worked. We're conducting an uncontrolled experiment in what happens when ahistoricism, unrestrained markets, and futurist propaganda run headlong into needing locals to clean sewer lines, bar-back, lay blacktop, wait tables, and collect trash.
posted by ryanshepard at 10:24 AM on August 7, 2015 [24 favorites]


If developers aren't putting up the money, then taxpayers have to--and speaking as a taxpayer I'm not at all interested in subsidizing a developer's ability to make back their investments in rent.

....Even if you as a taxpayer would also benefit from the increased quality of mass transit, roads, parks, police, schools, and fire protection in your neighborhood?
posted by EmpressCallipygos at 10:32 AM on August 7, 2015 [1 favorite]


This prior post is required reading.

You should understand that building costs for 100,000 condos (apartments) versus 1,000,000 condos are not 10x lower.
posted by the man of twists and turns at 10:36 AM on August 7, 2015 [1 favorite]


If developers aren't putting up the money, then taxpayers have to--and speaking as a taxpayer I'm not at all interested in subsidizing a developer's ability to make back their investments in rent.

....Even if you as a taxpayer would also benefit from the increased quality of mass transit, roads, parks, police, schools, and fire protection in your neighborhood?


It's complicated, because those things *need* to be expanded/improved if more development is going to occur. The traffic in NYC (where I just came back from -- I grew up there and my husband and I took a quick honeymoon there this week) is a disaster because there's just no room to put all the people who live, commute, and visit there every day. But improving conditions also means ripping up the streets, which no one wants, and raising taxes, which no one wants. Yes, people would benefit from investing in their own cities, but it's the tragedy of the commons -- they just want everything to magically get fixed for free and as invisibly as possible. So literally the only way for any of this shit to get done is for policymakers to force developers to shoulder the burden. I say "force" but I'm not necessarily against this either -- someone's gotta pay for it. (And then the construction from the endless infrastructure upgrades makes cities impossible to navigate anyway.)
posted by mirepoix at 10:44 AM on August 7, 2015 [1 favorite]


the Washington Post had a "if there was a nuclear blast in Washington, what would the damage be"-type interactive map the other day. it's slightly telling that all I could think about was how cheap real estate would be in my neighborhood post-nuclear bomb.
posted by kerning at 10:56 AM on August 7, 2015 [1 favorite]


MattD wrote: it's solely renters, and not landlords, who determine the rents. If tenants don't value granite countertops enough to pay for them, than they rent goes right back where it was when it counters were formica topped

In theory, yes. However, we aren't talking about discretionary consumer goods here. We're talking about housing, which is something everybody requires. The market is very inelastic, so if most everywhere has granite countertops and attempts to charge accordingly, people are forced to buy despite their preference for lower rent.

Consumers have about as much control over rents as they do health care costs or the cost of last mile telecommunications: almost none. Free market pricing mechanisms do not work optimally for goods that are essentially a compulsory purchase and has an artificial limit on supply (or demand) because the buyer is not actually free to walk away from the transaction. They may be free to walk away from a transaction, but they are compelled to complete some transaction.

The invisible hand may be invisible, but it ain't magic. It requires both buyer and seller to be equally able to walk away from the transaction. That is why overly strict rent control fucked landlords in New York and why a complete lack of it in a market where increased production on the necessary scale is fucking renters today. In neither case is there actually a free market.

Sadly, I don't have an answer as to how to fit housing into a market pricing mechanism in a way that actually works, only the observation that we don't presently have that and cannot given the structure of the market that does exist.
posted by wierdo at 11:07 AM on August 7, 2015 [21 favorites]


I don't actually believe that rents in desirable cities would go down any meaningful amount if rent stabilization were abolished -- that's a perfect-world scenario with an un-greedy, un-corrupted market. What would really happen is there'd be some minor movement from the tippy-top rent, with the newly destabilized rent just rising to be absurdly expensive anyway. Those highest rents would never be affordable regardless.
posted by mirepoix at 11:16 AM on August 7, 2015


But then I don't actually believe that "oh, developers are just DYING to build affordable units, it's all these constraints the gubmint places on them" is true either, even if zoning is a mess and cities are vulnerable to lobbying from the loudest special interests. You don't enter a real estate market like NYC or SF because you're a humanitarian.
posted by mirepoix at 11:21 AM on August 7, 2015 [2 favorites]


Yeah, I live in NY because when I started applying for jobs all over the country to expand my job search, this city was the only place that got back to me. As a matter of fact, I got multiple interviews here, while other "affordable" cities in comparison - Austin, Chicago, Atlanta - was like throwing my resume into a black hole. Go figure.

Yeah sure, there's a little contingent of those trust fundies we all love to kick around so much but the reality is, people come here because this city is always hiring. Get laid off at 9 and have something new by 5. Same probably goes for SF and the tech community. Give me those kinds of job options in Des Moines, and I'm there.
posted by windbox at 11:27 AM on August 7, 2015 [8 favorites]


ROU_Xenophobe, I definitely take your point that rental affordability doesn't necessarily reflect overall housing affordability. But not having an affordable market is really tough for all the people who need the flexibility of renting

Sure. I didn't mean that everything is fine because some cities have unreasonably high rental prices given the actual cost of housing. Not knowing anything about your personal finances or situation, it would just kinda suck to think that you were ruling out places you could maybe afford to live just because the rental markets are wonky. If you need the flexibility, then you do.
posted by ROU_Xenophobe at 11:30 AM on August 7, 2015


We're conducting an uncontrolled experiment in what happens when ahistoricism, unrestrained markets, and futurist propaganda run headlong into needing locals to clean sewer lines, bar-back, lay blacktop, wait tables, and collect trash.

Well, we're getting close to the breaking point. I used to take the train with the janitor for my old office in Vancouver. He spent 100 hours per week working and in transit between his three jobs. It was the only way he could provide for his family. He got a lot of his sleep on trains and buses, and waiting in stations, because when else was he going to sleep? This was four years ago. Things have only gotten worse there.
posted by [expletive deleted] at 11:49 AM on August 7, 2015


That FPP link doesn't work in Firefox. The web page renders, but you can't scroll to read beyond the first paragraph or so.

The web is too damn broken.
posted by intermod at 12:08 PM on August 7, 2015


Wierdo -- the housing market is very elastic. To use two cities mentioned in this thread, you can rent a palace in Wichita for the price of a hovel in Manhattan, with no difference between the two places in two fundamental human desires: having a roof over one's head, and making a return on one's investments. The differences are that land is abundant and demand is modest in Wichita, while land is scarce in Manhattan and demand is robust.
posted by MattD at 12:20 PM on August 7, 2015


"That FPP link doesn't work in Firefox. The web page renders, but you can't scroll to read beyond the first paragraph or so.
The web is too damn broken."

Reading it here in Firefox ok. Some kind of settings anomaly?
posted by Chitownfats at 12:39 PM on August 7, 2015


"the housing market is very elastic"

vs "Location, Location, Location"
posted by Heywood Mogroot III at 12:49 PM on August 7, 2015 [3 favorites]


....Even if you as a taxpayer would also benefit from the increased quality of mass transit, roads, parks, police, schools, and fire protection in your neighborhood?

After much thought, I'm going to surprise myself by answering "yes".

If your development plan can't work without major upgrades to public infrastructure, you should either be a generous contributor to society and put up the money to make those improvements or get out.

Nothing was more infuriating about the Boston 2024 Olympics bid than the promise that all those publicly financed improvements to the MBTA, to neighborhoods, to area roads, etc they needed to host the games (and support the subsequent redevelopment) would provide a "lasting legacy". If they had really wanted to leave us with a lasting legacy, they should have at least been gracious enough to pay for it themselves.
posted by RonButNotStupid at 12:59 PM on August 7, 2015


If we can pay for the infrastructure improvements we need for sprawl with tax dollars (and we do!), we ought to be able to pay for the infrastructure improvements needed to put homes into derelict industrial areas closer to town. The brownfields need cleaning up anyways.
posted by elizilla at 2:03 PM on August 7, 2015 [1 favorite]


As someone who refuses on principle to drive a car

Such principles are a luxury in this market.

Yeah, my panic attacks about driving are a total luxury. Watch me swimming around in it with a Draper-at-Esalen look of zen smugness. Also, please tell the thousands upon thousands of elderly, blind, and/or disabled people in America that they have a ridiculously hard time getting anywhere because of "luxury."

posted by mirepoix at 12:01 PM on August 7


Those things are not "on principle."
posted by fiercecupcake at 2:06 PM on August 7, 2015 [1 favorite]


MattD: the housing market is very elastic. To use two cities mentioned in this thread, you can rent a palace in Wichita for the price of a hovel in Manhattan, with no difference between the two places in two fundamental human desires: having a roof over one's head, and making a return on one's investments. The differences are that land is abundant and demand is modest in Wichita, while land is scarce in Manhattan and demand is robust.


Ok, great, we do have a solution, see? Let’s just ignore the reasons for the difference in demand and move around a bit more! Genius! why didn’t we think of this before?

Quick, you people living in Manhattan all move to Wichita, San Franciscans, please just maybe spread yourselves out a bit further north, like, Alaska, Londoners, please queue orderly to move to Hull, or Görlitz, your choice, it’s very very picturesque there and lots of cheap housing, madames et monsieurs en Paris, s’il vous plait, voulez vous all move to the non-fancy countryside, no Provence and no riviera don’t even think about that, Canadians and everyone else in the world please follow the Metafilter-sanctioned property crisis relocation scheme and swap places accordingly to mix things up a bit and then we can ALL take turns every 4 years to move to the cool hip big cities where the money and jobs and universities and research centres and media and government and NGOs and banks and stock exchanges are, and after 4 years move to the places with nothing happening, but secure in the knowledge in another 4 years we’ll get our chance again, round and round. It’d be so much fun!

Who volunteers for the coordination part? Can we post this in the Projects section? We just need to get the timing right, shouldn’t be too complicated.
posted by bitteschoen at 2:09 PM on August 7, 2015 [8 favorites]


This is a really great, interesting article. It's a shame only the highlights are being discussed , because there's a lot of meat there, and it poses pretty intractable dilemmas. How can you manage to strike a balance between renters who want protections against sudden increases, and landlords who have no way to make property viable, because they can't simply stop renting to their tenants? In NYC, they burned their own buildings down or simply stopped repairing them. In the home of a family members rent controlled apartment, I accidentally put my hand through a wall by leaning on it, because the wood and Sheetrock were all rotted out.

And it's a vicious circle. Because even if homeowners want to rent out at a lower price, their property taxes go up according to what they COULD be making, not what they actually are. If they don't have a lot of other income, if they don't raise their rents to crazy levels, they could lose their house.
posted by corb at 2:13 PM on August 7, 2015


Those things are not "on principle."

Except they are, because I am making it a principle of mine not to endanger the lives of others if I have panic attacks, just because that seems like a generally thoughtful thing not to do. I could "get over myself" and resign myself to the fact that multimodality is not going to happen in most of the U.S., because hey, part of a virtuous life is just sucking it up and accepting without question that capitalism is a thing that exists and we must all walk around with our heads bowed to it, but you know what? Fuck it. I have panic attacks and I am taking a stand about it by not forcing myself to adapt to transit-hostile environments when I'm not ready. Those two-ton hunks of steel aren't incontrovertibly safe no matter how much the auto giants push them on us and our policymakers.
posted by mirepoix at 2:33 PM on August 7, 2015


In a lot of countries outside the U.S., homes tend to include multiple generations living together.
posted by Perifferol at 6:28 PM on August 7, 2015


In a lot of countries outside the U.S., homes tend to include multiple generations living together.

Yeah, it's pretty common here too, in large part because the rent is, as the kids say, too damn high.
posted by tonycpsu at 6:32 PM on August 7, 2015


MattD, moving cities is difficult enough that it does not create the elasticity you claim it does. Again, housing is more akin to utilities than any other type of good. The market simply does not have the effect that it does with consumer goods.

Allow a reasonable return on capital and investment will still happen even with rent control. The problem with existing rent control schemes is that they only act to limit increases in the rental rate and do not take into account anything else.
posted by wierdo at 7:05 PM on August 7, 2015 [2 favorites]


So, the 50-year-old janitor who wanted to keep the Bronx apartment where his mama raised him but can't afford to do so now because the rents are too high should just move to Cleveland or something, because being a janitor and wanting to keep your family home are "cool" things he should just give up?

That argument is an empty strawman.

Your imaginary janitor is being priced out by the people seeking cool places to live, and the people who will complain.

See, since your imaginary 50-year-old janitor's family has been continuously occupying the same apartment since 1965 (because he was born there, right?), the family likely qualifies for rent control, which further limits the availability of rental spaces and drives landlords to raise other prices wherever they can. In other words, you could say he's part of the problem. A 50-year-old still in the same NYC apartment he was born in has lucked into the greatest real estate bargain in the economic history of mankind.
posted by Cool Papa Bell at 7:30 PM on August 7, 2015 [2 favorites]


That argument is an empty strawman.

No more so than the argument that "rents are going up because hipsters want to live in cool places".
posted by EmpressCallipygos at 7:33 PM on August 7, 2015 [3 favorites]


And even worse, they're both wrong about what the real problem is - unregulated banks and businesses screwing both the hipsters and the janitors over both.
posted by EmpressCallipygos at 7:34 PM on August 7, 2015


You don't think hipsters -- and the greater notion of simple popularity and desire -- don't create demand?

Sorry, can't help you. You may as well argue against the concept of gravity.
posted by Cool Papa Bell at 7:37 PM on August 7, 2015 [2 favorites]


I am priced out of the Bay Area at this point and will be moving back home to Minneapolis within the next year. I was on CL last night and found some small 1BR apartments near Lake Calhoun for $800 a month and I couldn't believe it. If I were still in tech I'd still be thinking about leaving, even if tech job prospects aren't remotely as good elsewhere as has been mentioned a few times in this thread.

I think that's another driver here for some cities - the remaining middle class jobs are concentrating in a smallish number of cities, so people will pay anything to live there and attempt to keep living the middle class dream. Meanwhile a friend of mine bought a house in Cincinnati not long ago for $80k.
posted by MillMan at 8:41 PM on August 7, 2015 [1 favorite]


You don't think hipsters -- and the greater notion of simple popularity and desire -- don't create demand?


Sure it’s one factor everywhere, in every major city worldwide that’s become a magnet attracting new residents, but the generic "hipster" label is ok as shorthand for a rant, it becomes reductive and even meaningless if you seriously want to look at all the reasons for the increased appeal and demand of a city, or neighbourhood within that city, and the kind of actual population creating that demand.

(Or of cities in general because this is a worldwide trend. China is the biggest example. We’re complaining about hipsters and rents rising, in some cities in China people can’t stay outdoors and breathe the air on some days. Why do they still want to live there? There’s sooo much land all round, why on earth would they want to pack themselves in tall buildings and breathe the most polluted air on earth? What possible reason could humans worldwide have to want to move to large urban areas with the highest concentration of financial and economic power? The mind boggles eh?)

Let’s blame the hipsters, it’s more fun and acceptable than blaming generic immigrants, but it’s still migration even within the same nationality and the main reasons for the majority of migration movements, at both domestic and international level, are not "because it’s cool and hip to live there".
There are entire areas of academic research devoted to this. There are entire areas of government devoted to this, it’s called urban planning.

When the government of a city actively attracts demand and interest and promotes the city as appealing to all from tourists to young people to business people to investors - as they ALL do, all major cities in the world do that, they want growth and encourage growth - and then fail to plan accordingly to make sure the infrastructure can cope with such growth, they are the ones responsible for the problems created by that gap between increasing population and decreased availability of housing (and increased traffic, increased congestion of public transport, increased pollution, etc. all the consequences of urban growth).

If there is unchecked property speculation benefiting a few and screwing the majority, that gap increases and that responsibility becomes heavier. In every country, all over the world, we vote and PAY big salaries with our tax money to people who are supposed to take care of this, in our interests. Let’s all take a moment to think about that next time we feel tempted to rail against our beloved enemy, the stereotypical hipsters, for making it harder to live in our cool cities. (And I don’t mean this as preachy, I know too well how tempting that is! I’ve fallen into that trap too. It happens when we narrow our vision so much we lose sight of the bigger picture, and we are constantly urged to narrow our vision. The media and public debate on these issues in every country where they are an issue is constanty being reduced out of laziness and convenience to the most simplistic arguments, to a purely local debate, and we are all exposed to that.)
posted by bitteschoen at 2:59 AM on August 8, 2015 [2 favorites]


You don't think hipsters -- and the greater notion of simple popularity and desire -- don't create demand?

Are we talking about demand or high rent? Because I think rich Russian oligarchs and CEOs buying places as second/third/whatever homes as tax shelters have more to do with high rent than hipsters do.

And actually, since we were also talking about taxpayer impact on a place - at least the hipsters would pay tax in that community. The Russian oligarch wouldn't because technically he doesn't live there.
posted by EmpressCallipygos at 3:33 AM on August 8, 2015 [2 favorites]


How about this as a solution to high property prices caused by non-resident investors?

Taxes. Really high property taxes. But! The taxes get poured into local services, as well as replacing other local taxes. Ideally, the result is revenue-neutral for residents, but it makes property less attractive for investors. Own-and-hold becomes a bad way to make money; investors sell their properties and put their money in other investments. People pour into the city because taxes are low and services are high. Eventually you reach an equilibrium with more accommodation for residents, better local services, and lower property prices.
posted by Joe in Australia at 4:13 AM on August 8, 2015 [1 favorite]


I have an issue with how people are framing my generation's flight into the cities. I know 7 people who have all moved to NYC in the past couple of years and not a single one of them said "I want to live there because it's cool/there are cool jobs there". They did it because there were opportunities for them. They understood it's expensive but chose to take a chance anyway in order to fulfill some sort of feeling and I don't think they should be demonized because of that. And these people aren't rich, they aren't going to come out okay if they fail, but so far they haven't. Three of these people wanted to be involved in music (two of them run sound for multiple venues and have done so for bigger, up-and-coming bands, and two of those three also play music themselves). I don't know their finances but they're doing fine. They worked, saved money, moved and got new jobs and are doing what they set out to do. The other four moved as couples: a friend of mine moved with his boyfriend because he got accepted into NYU, and the other moved with his boyfriend because he got an awesome job as an interior designer, which he then ended up doing himself and is doing great at.

None of these people said "oh well I heard NYC is cool I guess I'll just pack up and move on over there no big deal!" If a city has more opportunities, whether they're creative or something else, people will go there. People are sociable, and places like NYC are massive social centers. I don't think it's that weird.
posted by gucci mane at 2:04 PM on August 8, 2015 [3 favorites]




None of these people said "oh well I heard NYC is cool I guess I'll just pack up and move on over there no big deal!"

There was a pretty decent run of ask mefi questioned with the 'portland' tag at least asking where to move to in Portland with no job lined up, and seeking confirmation it was a good idea. I doubt the dissuasion provided was sufficient enough. At the very least, people do talk about pulling such stunts.
posted by pwnguin at 11:55 PM on August 8, 2015 [1 favorite]


I totally believe that rising rent is a big problem with hard solutions, but 1) you really shouldn't use average for rents or incomes, median is much better and at least they used median for income but 2) you really shouldn't compare the average of one thing with the median another!
posted by LizBoBiz at 12:54 PM on August 9, 2015


TL;DR - "greedy fuckheads being evil scumbags".
posted by turbid dahlia at 5:52 PM on August 9, 2015


Honestly the desire for city living is kind of a combination of things - some hipster, some "born and raised an urbanite", some economic.

Yes, hipsters gonna hip. They want to live in the coolest areas with the most walkability where they can buy organic food and drink fair trade coffee and shit - things that require the scale of a metropolis to be financially viable.

But also part of the problem is that urban middle class culture breeds itself, and middle class in the suburbs or more rural areas doesn't equate to what people think of as middle class in the cities. Nor do the professions that bring about middle class respect in those areas get respect from urbanites, and so urbanites are often particularly ill equipped to get jobs in those areas. They've been taught to look down on welders and plumbers and electricians and other "blue collar" jobs - and so they think there are no jobs, because they're thinking of white collar jobs as the only viable option. To be fair, once they've gotten student loans for an urbanite-valued degree, it often is if they're not going to have wasted their time.

And then you have the poor. Yes, more jobs lie elsewhere. But it's hard to break into them, and you need someplace to live in the meantime. In addition, most poverty programs and social services are in the cities. If you can be self reliant, rural areas are the best bet. But if not, you really need a city.
posted by corb at 6:35 AM on August 10, 2015 [1 favorite]


Not sure this is enough for its own post, but thought it may interest those who followed this thread:

Unpaid UN intern who slept in tent quits after media uproar
New Zealander David Hyde pitched up in Geneva when he landed prestigious internship and found he could not afford the city’s expensive rents
posted by bitteschoen at 12:03 AM on August 13, 2015


Ahmad Fawzi, a UN spokesman, told reporters during a weekly UN briefing that a general assembly resolution barred the organisation from paying interns. “We’re not allowed to even if we want to, and believe me we want to. We would welcome a change to that resolution,” he said, according to The Local.

Wonder if that's true.
posted by pwnguin at 6:43 PM on August 13, 2015 [2 favorites]


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